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TIAA's Guaranteed Fund
Old 03-01-2012, 02:12 PM   #1
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TIAA's Guaranteed Fund

DW's employer has a 403(b) ALT plan (no SS). Her employer contributes 5.3XX% of her salary to TIAA's Guaranteed Fund on her behalf. This % is fixed and there is no choice where her employer's part goes while she is employed. So she is in the fund - like it or not. (TIAA "guarantees" principal is preserved plus a conservative rate of return - 3% for 2012 and historically more than that for the life of the fund.)

She is also required to contribute 3% minimum. Her part can be invested in the full range of TIAA-CREF funds - so a decent cross-section of investments. She contributes more - let's say it is 60% of the total invested monthly with TIAA-CREF with her employer's portion being 40% of the monthly total.

Retirement target is 9 years from now when DW turns 60. She will be eligible for a humble but decent pension then and let's say she has a paid-off home. She will be eligible for a small SS benefit due to previous employers - say, $500/month at 62.

This isn't the whole scenario, but you get the idea - how aggressive would you be with DW's portion?

(DW says: "Why don't we put it ALL in the Guaranteed Fund?" We never should've gone over those brokerage statements together back in "aught-two". )
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Old 03-01-2012, 04:15 PM   #2
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Lots of folks including me use the TIAA traditional annuity as part of the fixed income allocation of their overall portfolio. So it just fits into their asset allocation as fixed income.

As for the rest, you can figure out what percentage of fixed income and equities you want for your entire combined portfolio and act accordingly in a tax-efficient manner. Don't forget to rebalance when needed and also do some tax-loss harvesting in taxable accounts if needed.
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Old 03-02-2012, 10:59 AM   #3
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I've had TIAA-Traditional since 1987 and it has ticked along at between 6 and 3% every year. It forms part of my fixed income. Remember that TIAA's guarantees come at the price of flexibility. Once the money is in there you can only get it out over ten years. They really want you to buy an annuity with the balance when you retire.
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Old 03-02-2012, 12:16 PM   #4
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I can see two sensible alternatives.

1. Simply view the guaranteed fund as a fixed income substitute in your overall AA, and appropriately consider in your overall AA that her SS is ~$500/mo.

2. View the employer and 3% minimum she contributes as a substitute for SS and keep it in the guaranteed fund and view her excess contributions as part of your overall AA.

Actually the return being paid by the guaranteed fund isn't bad.
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Old 03-02-2012, 01:47 PM   #5
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I use TIAA-Traditional as a substitute for social security. I'll get some SS as I paid into it for around 15 years, but not much and it will be subject to the
Windfall Elimination Provision because I now work for a state government. I pay into a DC plan so the TIAA-Traditional along with my WEP'ed SS is how I guarantee a minimum level of income.
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